Warren Buffett Total Stock Market Value to GNP Ratio Reviewed

MyPlanIQ submits:In his 2001 Fortune magazine article, Warren Buffett used the ratio of the market value of all US publically traded securities to Gross National Product (GNP) as a yardstick to measure the stock market valuation. He stated, Complete Story »

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MyPlanIQ submits:Warren Buffett created a ratio of the market value of all US publicly traded securities to Gross National Product (GNP) as a yardstick to measure stock market valuationMyPlanIQ has been tracking this index and presents the current status. This will be reported every other week (bi-weekly)

ByAharonovich Management:Do you respect Warren Buffett and value his opinion? I'm sure you do. There's no reason why you wouldn't.In my previous article I pointed out that the U.S. economy doesn't seem to be in a good shape and that the markets are underestimating the "1/4 Cliff" as well as the sequestration immediate implications on consumption.

For the first time since the recovery began, Warren Buffett’s favorite valuation metric has breached the 100% level. That, of course, is the Wilshire 5,000 total market cap index relative to GNP. See the chart below for historical reference.

By Cullen Roche: For the first time since the recovery began, Warren Buffett's favorite valuation metric has breached the 100% level. That, of course, is the Wilshire 5,000 total market cap index relative to GNP. See the chart below for historical reference.

By Cullen Roche: It's been an amazing run in the stock market. But I have to admit that I start to feel a bit uneasy about things when I see all news reported as good news, because it either means the economy is getting better or more QE is coming. That wouldn't bother me so much if corporate earnings were still booming and the economy was growing strongly, but neither one is occurring. In fact, the market is just driving higher on what looks like sheer optimism of continued QE and little else.

Cullen Roche submits: As the market continues to grind higher each and ever day, it’s useful to gain some perspective on just how much Bernanke is impacting valuations and generating disequilibrium in the market. In order to do so we’ll review a number of long-term valuation indicators.

By Nupur Acharya & Ravil Shirodkar India’s booming stock market is now worth almost as much as the nation’s economy. But that’s not unsettling Raamdeo Agrawal, the broker turned stock picker who built a multi-billion dollar financial firm using the tenets of Warren Buffett. While the benchmark index has set multiple records this year, Agrawal says it’s still relatively cheap by the sage of Omaha’s favorite valuation indicator -- market capitalization to gross domestic product.